A traditional economy usually centers on individual survival. Families and small communities often make their own food, clothing, housing, and household goods. The economies of developing countries, which have largely traditional economies, often rely on agriculture. Developing countries also rely on raw materials, which can be traded to developed countries for finished goods. These raw materials include oil, coal, and timber.
Developed countries, which have modern economies, are more diverse. Their economies rely on many different people and organizations performing specialized tasks. Agriculture and raw materials represent only part of the economy of a developed country. Other sectors include manufacturing, banking and finance, and services such as hairdressing or plumbing. This vast economy results in a great variety of goods and services.
There is no single test to determine what is a developing country. One way to rate a country’s level of development is by the total value of goods and services the country produces, divided by the number of people in the country. This is called the gross national income (GNI) per capita.
Developed nations have much higher GNI per capita. For example, Luxembourg has a GNI per capita of $69,390. The United States has a GNI per capita of about $48,000. Singapore has a GNI per capita of $34,760.
Signs of a high level of development include industrialization and the everyday use of advanced technology.
Levels of education are also related to development. Developed countries usually have higher literacy rates, meaning most of their population can read and write.
Developed countries have a high life expectancy, or the average number of years a person can expect to live. Japan, a highly developed nation, has the highest life expectancy of any country, at 82.7 years.
The age structure in developed countries usually has its largest population group between 15 and 64 years old. Countries whose age structure is very young (a large population under 15 years old) may have to spend more on education. People under the age of 14 typically cannot maintain steady, full-time work to support the economy. Half of the population (50 percent) of the developing country of Uganda is under the age of 14, with only 48 percent between the working ages of 15 and 64.
The unemployment rate can also be an indicator of the level of economic development. In developed countries, most adults usually work. The unemployment rate, or able adults who cannot find work, is often below ten percent. In developing countries, such as Zimbabwe, the unemployment rate can be as high as 95 percent.
Developed countries usually have a large middle class. Middle-class incomes fall between poverty and great wealth. Some developing countries have large populations living in poverty. In Haiti, 59 percent of the people live in poverty.
As countries begin to develop, their agricultural output usually increases. Improved technology allows fewer farmers to harvest more food. This raises the income of people in rural areas, as well as allowing more people to work in jobs outside agriculture.
Another sign of development is a growth in exports, or products grown or made in one country that are sent to another country for sale or use. A country can export raw materials, such as oil or corn. A country can also export finished goods, such as computer software.
The amount of electricity used by a country can also indicate its level of development. Electricity is used in homes, schools, and businesses. Factories use huge amounts of electricity. Electrification, especially in rural areas, is an important process for a developing economy.
Electrification is often expensive. The high cost of oil, natural gas, and coal may slow the electrification process. Constructing facilities that run on hydroelectricity or nuclear energy often requires technology and money that developing countries do not have. Some developing countries, such as Bangladesh, are trying to use renewable energy, such as solar or wind, to bring electricity to their rural population.
Countries that are switching from agricultural to industrial economies, and are experiencing rapid economic growth are sometimes called newly industrialized countries. They usually have lower poverty rates than less developed nations, but they have not yet reached the income and education levels of developed countries. Newly industrialized countries include India, Brazil, and Thailand.
The Good Life
The United Nations rates the development of nations using the Human Development Index (HDI). In addition to GNI per capita, the HDI takes into account literacy rates, school enrollment, and life expectancy. According to the HDI, in 2010 Norway was the most developed nation in the world. The United States was fourth.
Another BRIC in the Wall
The economies of Brazil, Russia, India, and China are sometimes grouped together as "BRIC." These countries are not part of a political or trade alliance. However, they are all large countries with large economies that are growing very quickly. Some economists believe that by 2050, the economies of BRIC countries will be larger than the United States or the European Union. South Korea and Mexico are sometimes compared to BRIC countries.
pattern of age distribution among a population.
total amount of goods produced in the agricultural industry.
the art and science of cultivating land for growing crops (farming) or raising livestock (ranching).
people or groups united for a specific purpose.
organization that loans, protects, and exchanges money to and from individuals and organizations.
term for the rapidly developing economies of Brazil, Russia, India and China.
dark, solid fossil fuel mined from the earth.
sharing of information and ideas.
a nation that has high levels of economic activity, health care, and education.
nations with low per-capita income, little infrastructure, and a small middle class.
growth, or changing from one condition to another.
varied or having many different types.
study of monetary systems, or the creation, buying, and selling of goods and services.
system of production, distribution, and consumption of goods and services.
set of physical phenomena associated with the presence and flow of electric charge.
good or service traded to another area.
person who cultivates land and raises crops.
item assembled and ready for sale.
gross national income (GNI)
total value of goods and services a country produces, divided by the number of people in the country.
the gathering and collection of crops, including both plants and animals.
system for addressing the physical health of a population.
person or family's belongings, not including real estate or vehicles; including appliances, clothing, and furniture.
Human Development Index (HDI)
guide developed by the United Nations, measuring a country's achievement in three areas: life expectancy, adult literacy and school enrollment, and standard of living measured by the country's Gross Domestic Product per capita. HDI uses a scale of 0-1.
power generated by moving water converted to electricity. Also called hydroelectric energy or hydroelectric power.
wages, salary, or amount of money earned.
to add or become larger.
growth of machine production and factories.
average number of years a person lives.
ability to read and write.
to continue, keep up, or support.
production of goods or products in a factory.
people and culture characterized by incomes between the working class and the wealthy.
type of fossil fuel made up mostly of the gas methane.
newly industrialized country
nation switching from an agricultural to an industrial economy and is experiencing rapid economic growth.
energy released by reactions among the nuclei of atoms.
fossil fuel formed from the remains of marine plants and animals. Also known as petroleum or crude oil.
for each individual.
status of having very little money or material goods.
natural or human actions that create and change the Earths features.
matter that needs to be processed into a product to use or sell.
to depend on.
energy obtained from sources that are virtually inexhaustible and replenish naturally over small time scales relative to the human life span.
regions with low population density and large amounts of undeveloped land. Also called "the country."
section or a part of something.
electronic programs of code that tell computers what to do.
knowledgeable or complex.
to study, work, or take an interest in one area of a larger field of ideas.
the science of using tools and complex machines to make human life easier or more profitable.
wood in an unfinished form, either trees or logs.
production and exchange of goods and services that relies on local culture, local resources, and inheritance.
movement of people or goods from one place to another.
state of not having a job.
international organization that works for peace, security and cooperation.
huge and spread out.
amount of money or other valuable materials.